Tuesday, February 17, 2009

Civil RICO Ineffective Against Conspiracy to File Malicious Claims

This posting was written by Mark Engstrom, Editor of CCH RICO Business Disputes Guide.

Allegations that attorneys conspired to harm individual and corporate plaintiffs by maliciously filing a counterclaim, in a previous action, based on false representations were insufficient to maintain a civil RICO action, the U.S. Court of Appeals in Cincinnati has ruled.

The attorneys, their law firms, and various individuals had conspired to prevent an anticipated settlement in the earlier action, according to the plaintiffs.

The plaintiffs alleged that the attorneys had tampered with a witness and engaged in mail, wire, and bankruptcy fraud in an effort to further a scheme to deceive and defraud them. However, a close examination of the pleadings revealed that the plaintiffs were actually claiming that the attorneys had used the mails and wires to file a counterclaim and a bankruptcy petition, the court explained.

Malicious Prosecution, Abuse of Process

These acts constituted malicious prosecution and abuse of process rather than RICO violations. Accordingly, to the extent that their filings were overly zealous or malicious, a proper remedy could be sought in the state law claims of malicious prosecution and abuse of process. The trial court's dismissal of the RICO claim was therefore affirmed.

The dismissal of claims that were asserted against nonmoving defendants was affirmed because the failure of those defendants to file their own motion to dismiss did not cure the defects that were present in the complaint, the court observed.

Because the same RICO claims were asserted against all parties, a finding of a failure to state a valid claim against the moving parties would logically extend to the nonmoving parties, as well.